What’s that saying about the only constant being change? The adage is true in every aspect of food retailing today, including dairy.
The landscape of dairy departments is changing, and some of it is due to actual landscapes, with the proliferation of products from plants and plant proteins in addition to those from animal sources. Those products may represent only a slice of the overall market, but the upward trajectory is having a ripple effect. For one thing, grocers are looking at and often altering their product mix to meet demand from consumers who are open to new products. In another sense, dairy manufacturers are finding ways to compete with these items, honing their own R&D. And plant-based brands continue to launch alt-dairy products or expand their current portfolios.
- Demand for plant-based dairy products will continue to grow quickly as more consumers seek alternatives to dairy items, based on the perception that nondairy offerings are better for health, the environment and animals than traditional dairy products.
- As an increasing number of shoppers include both dairy and alt-dairy items in their diets, more hybrid products, combining milk with almonds or oats, for example, will appear on the market, allowing greater innovation for dairies.
- Meanwhile, the traditional dairy space continues to offer inventive new products centering on health and wellness, transparency and sustainability, premium ingredients, and convenience.
According to information from Rockland, Md.-based Packaged Facts, plant-based beverages are set to comprise 40% of the total dairy and nondairy beverage market by the end of 2021. Data from IRI, a Chicago-based market research firm, reveals that sales of almond milk alone grew 5.6% to just over $1.3 billion in the last 52 weeks ending Feb. 23.
IRI also finds that sales of refrigerated milk substitutes, which encompass nondairy milks such as oat milks, rose a whopping 60.8% to $182,446,130 in that same time frame. That compares with sales of fluid milk, with whole milk rising 3.9% to top $4,970,721,837, and skim/low-fat milk dipping 2.1% but still ringing up $6,917,228,501.
The Rise of Plant-Based Products
“Demand for plant-based dairy products is going to continue to grow quickly as more consumers seek alternatives to dairy products,” predicts Cara Rasch, a Packaged Facts analyst. “In recent years, we’ve seen greater popularity for plant-based dairy products in general and a number of new plant-based product introductions. Like plant-based meat, plant-based dairy products are desirable due to common perception they are better for health, the environment and animals than traditional dairy products.”
Eric Richard, industry relations coordinator for the International Dairy Deli Bakery Association (IDDBA), in Madison, Wis., says that the advent of plant-based items is spurring a different kind of dairy case. “It’s definitely growing,” he says, adding that, for better or worse, many consumers perceive “plant-based” as a term that conveys health and wellness, even if plant-based beverages aren’t the same as true dairy milk from cows or other animals.
Companies that produce plant-based alternatives confirm brisk growth in their product lines.
“Our company has tripled in sales over the past five years, and that curve continues,” notes Greg Steltenpohl, founder and CEO of Los Angeles-based Califia Farms, which offers a line of plant milks, creamers and yogurts, in addition to new products like a soon-to-be-launched plant butter made from cashews and tiger nuts. He also points out that plant-based milks with a longer shelf life than many fresh dairy products will also be in demand during the crisis related to the COIVD-19 outbreak.
While dairy processors have fought hard to keep dairy products the only ones labeled as milk, and as the U.S. Food and Drug Administration (FDA) revealed it would review and update dairy labeling, it’s not an all-or-nothing proposition for many consumers who buy and consume both dairy and alt-dairy products.
Steltenpohl agrees that consumers generally have open minds that are reflected in their purchase choices. “It isn’t all about veganism — it’s about household units, families and even co-working spaces having a plurality of choices, with both dairy in the fridge as well as plant milks,” he notes.
Reflecting how people are including both types of products in their diets, new products blending dairy and plant-based ingredients are hitting the market. “I think what we’ll see more of, and as a way for dairies to compete, are combination products — perhaps milk with an addition of almond or oats,” says Richard.
Likewise, Paul Ziemnisky, EVP of global innovation for Dairy Management Inc. (DMI), in Rosemont, Ill., believes that such combination products may be a win-win. “Interest in hybrid products that blend animal and plant together is opening the door to new innovation for dairy. There are dairy offerings that ‘sneak in’ vegetables, and dairy products that combine milk with other plant ingredients like almonds and oats,” he points out, citing items like Peakaboo Ice Cream, Chobani Nut Butter and Live Real Farms Milk Blends.
Other brands, too, are getting in on this kind of plant-dairy fusion. The Oikos brand, from White Plains, N.Y.-based Danone North America, recently added a line combining whole-milk Greek yogurt and almond butter, available in five flavors.
In addition to fortified and nutrient-rich traditional dairy products like milks and yogurts, other health-oriented dairy items are offering novel formats. The Cultured Snacking Co., also part of Danone North America, has rolled out such new snacks as probiotic yogurt bars and probiotic nut butters.
Innovations for Growth
While plant-based products may grab a lot of attention among consumers, they currently comprise only a portion of dairy department sales and shelf space. Meanwhile, innovations within the traditional dairy category continue apace.
Many of those innovations are centered on health and wellness. For instance, Oikos has added a line of Oikos Pro Fuel ready-to-drink caffeine energy drinks and coffee beverages for on-the-go nutrition.
In addition, dairy brands are setting themselves apart with products that exemplify consumer interest in transparency and sustainability. Danone’s Horizon Organic brand recently revealed plans to become the first national USDA-certified organic dairy brand to be carbon positive by 2025; Horizon also recently developed a line of Growing Years whole milk created for children between the ages of 1 and 5. Growing Years half-gallons will be the first of the brand’s certified Carbon Neutral products by the end of next year.
Other product and packaging innovations in dairy are driven by consumer interest in premium products or items that deliver an experience. One example comes from the cheese category, where many retailers are promoting artisan-style cheeses combined with other high-end ingredients.
“Charcuterie now is where specialty cheese was 10 or 20 years ago,” asserts IDDBA’s Richard. “It’s getting attention especially from retailers who want to draw in traffic by bringing in the idea of experience and entertaining.” (This was before COVID-19 restrictions, of course, but it likely will pick up again when such gatherings are again allowed.)
Other dairy segments are commanding a premium, too. Danone’s SToK brand has launched a line of Fueled Creamers containing 5 grams of protein, 5 grams of MCT oil and real butter for a rich taste and keto-friendly appeal.
Meanwhile, the longtime driver of convenience remains a factor in consumers’ diets and in the dairy products they choose. “Innovation and convenience in the snacking category continue to flourish, and we’re seeing dairy capitalize on the on-the-go trend, “ says Ziemnisky, citing products like cheeses packaged with fruit and nuts, high-protein and low-carb cheese “chips,” and grab-and-go yogurts with lower sugar and higher protein content.
Another way to keep traditional dairy products on the minds of today’s consumers is for grocers and manufacturers to promote the inherent benefits of these foods and beverages.
Packaged Facts’ Rasch agrees that this kind of messaging is important, especially as dairies contend with plant-based competitors.
“There are many opportunities for dairy products with a number of designations such as premium, local, artisan and organic,” she observes. “The clean-label movement in particular eschews most of the dairy alternatives on the market, due to the addition of ingredients such as preservatives and artificial flavors.”
In addition to offering a diverse mix of products in the dairy case, grocers can deploy other tactics to engage consumers with these items. Suggests Richard: “How it is merchandised in the store is important, too. The dairy department is way in the back, and it’s there on purpose so people shop their way there. But you have to make it easier for individuals who aren’t looking to buy a gallon of milk and put those other products more in front of the store — utilize reach-in cases and grab-and-go to capture that audience.”
Finally, there may be even bigger changes down the pike for retail dairy, including more alt-dairy products and blended products, as well as items that are neither dairy- nor plant-based. Notes retail consultant Bill Bishop, principal at Barrington, Ill.-based Brick Meets Click: “Under the circumstances now, where everyone wants cold, fresh refrigerated product, I think we could see some very big changes.”